Once a bustling scene of customers eager to explore and choose the vehicles they want, showrooms now spend most days idle, cleaning and preparing cars in the hope that a customer will eventually walk in.

“You know business is slow when the phone stops ringing like it used to,” said Arif Khan, general manager of Motors Bay, a showroom in Tejgaon overlooking Hatirjheel. Like him, almost all showroom owners are worried that sales have dropped to near zero.

The once booming luxury car market in Bangladesh is now in sharp decline. Sales of high-end cars have been on a steep downward slope since mid-2024, hit hard by political instability and economic challenges.

In addition to economic and political obstacles, social factors also influence spending on luxury items, with many hesitant to display wealth in a time of increased control over sources of income.

According to the Bangladesh Road Transport Authority (BRTA), private car registrations fell 36 percent from last year – a staggering drop even before protests over quota reforms in July and August.

“What people don’t realize is that even those who can afford it are reluctant to spend because of social control.”

Arif Khan, Managing Director of Motors Bay

For luxury car dealerships that have long served the elite, the decline came as a shock. Cars priced above 1 million lei, often seen as symbols of wealth, now sit untouched in showrooms as sales come to a near standstill.

Political uncertainty and economic pressure keep these high-end cars out of the reach of their usual buyers – wealthy businessmen and prominent figures who are suddenly more wary of making high-cost purchases.

A declining market

The luxury car market in Bangladesh has traditionally relied on wealthy customers, including those in political circles and high-stakes industries. However, the country’s political instability has changed purchasing behaviors. Mohammad Shahidul Islam, secretary general of the Bangladesh Used Vehicle Importers and Distributors Association (BARVIDA), attributes this steady decline to a number of factors.

“We have reached a point where business has slowed down dramatically,” Islam told The Business Standard. “Our clients are much more cautious, assessing the political and economic climate before making investments.” The hesitancy is most notable in the luxury segment, where demand for cars priced above 1 million lei has fallen to just a fraction of previous levels.

Luxury car purchases, once popular among the wealthy, are now perceived as financially risky. Mohammad Bin Sultan Shopan, senior director of marketing at Xoom Auto, echoed Islam’s concerns, reporting near-zero demand for refurbished cars above 1 million lei. Cars in the Tk80 lakh to Tk1 crore range, which saw sales of around ten units per month, have now dropped to four units in the last few months.

It’s not just about the financial risk; expensive cars attract attention and many now avoid this visibility. “What people don’t realize is that even those who can afford it are reluctant to spend because of social control,” Motors Bay’s Khan said, noting that social factors are increasingly influential.

Economic pressures add to the crisis

The already bloated economic atmosphere has further burdened the luxury car market with increased import taxes and fluctuating currencies, making these vehicles more expensive. The Tk3-4 lakh hike in the price of big-engined cars due to higher import duties and the weakening of the Taka has pushed potential buyers away from the luxury segment.

“There is a lot of talk about the revenue streams for luxury car purchases, but I would estimate that about 80 percent of our customers are legitimate business people,” Islam said. “This decline is not just a problem. The dollar crisis and rising import costs are turning these cars into luxury products, beyond the reach of even the wealthy few.”

The dollar crisis has also made it difficult to obtain letters of credit (LC) for imports. Islam explained that LCs are no longer a major issue as banks are now willing to issue them. However, LC numbers have fallen simply because demand has slowed. The main factor, he added, remains political stability, which directly affects consumer confidence.

Switch to lower priced models

As luxury cars fall out of favor, buyers are turning to more affordable options. Dealers note that showrooms are performing comparatively better for cars under 50 lei, although sales remain weak. This cost-conscious trend is evident as sales of cars priced between Tk60 lakh and Tk70 lakh fell by 50%, while those below Tk50 lakh fared relatively better. But even in that category, sales are down to about 60 percent from previous levels, according to Shopan.

Dealers are responding by appealing to budget-conscious customers with extended warranties and after-sales services. “We have more inquiries for cars under 50 lei, but interest doesn’t always lead to purchases,” said Shopan.

Looking ahead

For many in the auto industry, today’s crisis is reminiscent of 2007-2008, when political and economic uncertainty under Bangladesh’s caretaker government made wealthy buyers hesitant to invest in luxury purchases.

Islam believes that a market recovery can be based on an improved political and economic environment. “This is a temporary setback,” he said, hoping business could bounce back early next year. “We hope that improvements in the rule of law and political stability will eventually translate into the recovery of our sector.”

However, the situation is dire: as luxury car sales decline, the effects are spreading throughout the auto sector. While the government’s recovery efforts are significant, they have not been enough to counter inflation and the weakening of the Taka, both of which have eroded purchasing power and further dampened demand.

Islam stressed that a market recovery will depend on government intervention and a renewed spirit of openness in dialogues with key stakeholders. “A caretaker government that listens to business concerns can help ease anxieties and build confidence,” he suggested. “To make progress, we must focus on nation-building, not politics.”

With so many overlapping factors adversely affecting the luxury car market in Bangladesh, the future is uncertain. However, industry players like Islam remain optimistic that stability will eventually take some of the pressure off, allowing the luxury car market to thrive again, hopefully by early next year.